A number of people in the industry approached The Media with disturbing allegations about corruption in the media industry, which is apparently on the rise.
While industry insiders say that fraud is nothing new, the frequency and scale of dirty deals may be escalating to the point where a culture of corruption is taking hold. While most of The Media’s highly placed sources agreed that they had experienced corruption in one form or another, the issue is such a sensitive one and one that could cost them so substantially that none of them wanted to be identified or even directly quoted.
A niche market magazine publisher, Richard*, explains that he is getting more and more requests to help staff from corporate marketing departments defraud their employers. He deals directly with advertisers, selling them advertising space in his publications. Many of his clients are large corporations, each with teams of marketing people.
Last year, Richard was approached by one of these marketing department employees with an overtly fraudulent proposition. The client/corporate marketer said he would agree to pay full price, no negotiations, for the ad space if Richard invoiced him for about R10 000 more than the price. The money would be paid by the corporate and Richard was to transfer the extra amount to the marketer’s personal account. In return, Richard would get this large company’s regular business and the client would pay top dollar for the space.
Richard was shocked and just brushed off the incident after politely refusing the offer. But that request was followed shortly by another person from a different corporate marketing department, and then another and another. The fraudulent amounts involved were tens of thousands of rand. Richard has been in the business for years and says he has never encountered this sort of problem – and is suddenly experiencing it a lot.
He and his team have taken the decision to refuse any business that comes to them with this sort of condition attached, although this means losing many ad sales deals, which are the lifeblood of their publishing company. A member of Richard’s team says, “Obviously, we don’t want to lose the clients, but we cannot get embroiled in this behaviour. We tell these people that we would be happy to return the over-pay if they invoice us separately for the amount. This seems to be a bit of a deterrent!”
But Richard’s team are concerned that their honesty will cause them to lose business and ultimately make them unattractive to potential clients. Even significant clients, with whom they have had long-term relationships, are starting to initiate these dodgy deals.
In a another case known to The Media, Hugh*, the creative director and part-owner of a Johannesburg media and design company, is finding it so difficult to do business due to corporate corruption that he has considered emigrating. Hugh’s company services a retail giant with various brands under its umbrella. Each brand has its own marketing or brand manager who briefs Hugh’s team. The marketing managers were ‘mistakenly’ overpaying the agency for the work done and then requesting a refund into their own pockets. Hugh says that he has also noticed an increase in this behaviour. The fact that the requests to engage in such deals are coming from every brand under the group’s umbrella suggests that the practice is widely known – even condoned – and imitated.
For Hugh’s agency, honesty has certainly not paid off. His company’s hesitation has led to the corporate removing a large portion of the agency’s responsibility and giving it to a rival. While Hugh’s company still does all the design work, they no longer do the events, printing or strategies – a significant loss to the agency.
Richard’s company deals directly with clients. Would it help if they dealt via media agencies as most publishers do? Well, no. It appears that media agencies themselves are experiencing corporate corruption too, from fraud like that described above to practices like cronyism. Media agency sources that work or have worked in top positions in agencies said the corruption is at all points in the media chain, from clients to brokers. This, they agree, means that many people might be complicit in a deal. Corporates spend huge amounts of money on media, so the temptation to skim a little off the top is great. “Agencies, media owners, clients – they see these huge numbers being spent on media and they want to get their hands on it,” says one agency source.
Some media owners suggest these incidents point to a broader culture of corruption in South Africa. The public sector is reportedly notoriously corrupt, as many in the media industry will attest from experience. So there’s already a national tolerance, or at least a sense of resignation – ‘Oh well, that’s just the way it is now’ – for this kind of behaviour. The media industry is liberalised and hyper-competitive with many players and a lot of money at stake. Media agencies are losing money as the media landscape fragments and the commission paid by clients is split between several specialist planning and buying agencies.
A publisher suggested to The Media that this kind of climate makes it challenging to do business and creates a culture that is ripe for exploitation.
More than one source says that the culture of corporate gifting at the very top levels of business has contributed to the situation. Some media owners jostle for clients, trying to lure them with expensive junkets and gifts, lavishly trying to outdo their rivals or risk losing business. Most media owners and big corporations have stringent rules about what employees may accept in the form of gifts, with the employees having to submit them for clearance and there usually being a strict limit to the value of these gifts. Richard’s company does not allow its employees to accept gifts of over R300. At some media houses, even a branded pen must be declared!
This practice of gifting may be unpalatable to some, but it’s certainly not illegal. A marketing manager of a small publisher, who has experienced corruption of the sort that Richard and Hugh experienced, says this is a different practice altogether. This is fraud and “these marketers are after cold, hard cash”, she says. However, the point remains that gifting or bartering may contribute to a culture in which a lot of money is being spent on procuring business by people at the top and employees lower down the chain end up wanting a slice of the pie. Corporate gifting also clouds business decisions, because these decisions cease to be made on the basis of who can offer the best service at the best price, and become based on who can offer the best junkets.
Media industry insiders stressed that while corruption may be widespread, it’s not ubiquitous. There are many corporations that observe corporate governance; many agencies that don’t take the bait; and many small businesses that are prepared to give up business rather than dirty their hands. However, as one source told The Media, the industry needs to talk about uncomfortable truths openly – and this just isn’t
happening.
* Names have been changed to protect the reputations of those interviewed. However, The Media spoke to only senior management at the various organisations and is sure of their credibility.
This story was first published in the April issue of The Media magazine. The digital version can be downloaded here.
